The Importance of Financial Margin

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Learn more at guidestonefunds.com slash faith. Margin is one of those important things in life that we often take for granted, and that can lead to trouble. Hi, I'm Rob West. Margin basically means something extra, a little extra time or even distance from the car in front of you. It's critical, especially with your finances. I'll talk about financial margin today, and then it's onto your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial journey. Well, you may not always connect the word margin with personal finances, but you're probably familiar with its use in the business world, where the term is usually profit margin. When we buy an item at the store, we don't consider how it got there, but someone had to make it, usually many people working for a company. They all need to be paid wages. Then salespeople had to get retailers to buy the product or service, and they need to be paid a salary and often a commission on top of that. Transportation people have to get the product to retailers, and they need to be paid.

Then retailers have to mark up the product because they have bills to pay and need to make a living too. So you've got several business entities involved in getting that product to where you can purchase it. At each step along the way, the manufacturer, trucker and retailer all need to have a sufficient margin or profit to make it worthwhile for them or the product never gets to you.

Now, how much is sufficient? Well, it varies widely depending on the product and how much it costs to bring it to market. Other factors play a role competition, market size and volume. The more units you sell, the smaller your margin needs to be. A new automobile has thousands of dollars of margin, but a lot fewer of them are sold then say hamburgers at fast food joints.

You know, so many billions served. If you sell a billion of something, even with only a few pennies margin, you'll probably do all right. So how do we apply this lesson to our lives? Well, the same principle holds true when it comes to our margin and not just for money but for our time and energy as well. How much do we have left over after all of our obligations are met? You have your job, family commitments, chores around the house and obligations to your church. So you must also prepare for unexpected or irregular expenses, a broken water pipe or car repairs. All of these involve time, money and effort on your part. Do you have time and energy left over to recharge your batteries and spend time with God?

That's another form of margin that we all need. Now, I'm not equating time with God to your other obligations. That's not just something to check off your to-do list. Time with God isn't something we have to do. It's something we get to do and it's critical for living a balanced life with our time, families, service to the Lord and of course our money. Now, what does having margin with our personal finances look like? Well, it simply means having extra for the so-called rainy days, family emergencies, medical expenses above your deductible or helping a visiting missionary or college student if God speaks to your heart.

The key to acquiring that margin is living on a budget or a spending plan to help you decide in advance where your money will go. Did you know there are only four things you can do with money? You can live on it, give it away, owe it to someone or grow it. Every dollar you've ever made or ever will make goes into one of those four buckets. A budget is just a way of deciding ahead of time what goes where. By the way, this isn't the same as balancing your checkbook for example. That's just seeing where your money went, not deciding in advance where it should go.

If you haven't downloaded the FaithFi app at your app store, we encourage you to do so. It uses the envelope system and gives you three different ways to set up your budget, making the process really easy. If you're not making spending decisions ahead of time and giving yourself financial margin, your income won't be able to keep up with your outgo. As you set up your spending plan, you may see that you have more month left over when the money runs out. If that happens, you've got to make some changes, find a way to increase your income or reduce your expenses or both. The key is learning to live on less than you make, having margin or money left over at the end of the month. Without it, you'll slide into debt and never be able to save for the future. And here's a bonus. When you finally get financial margin, you may find that you also have more physical and emotional margin.

You'll sleep better, feel more relaxed and be better able to use your spiritual gifts to serve God and help others. So that's the importance of margin, financial and otherwise. All right, your calls are next 800-525-7000. I'm Rob West and you're listening to Faith and Finance.

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Find more information at kingdomadvisors.com slash get certified. Thanks for joining us today on Faith and Finance. All right, it's time to turn the corner and take your questions on anything financial.

We want to tackle those questions today. The number 800-525-7000. Again, that is 800-525-7000. Let's go to Oklahoma. Hi, Sheila.

How can I help you? Yes. My question, if you work for a school and you just want to put it strictly into a Roth, has the government mandated that they have to offer just a Roth or is it just optional even for a school? So where they wouldn't have to offer it, they would just offer what they normally do. Yeah, they do not have to offer it. So that's something that some employers and plans are making that Roth option available, but many of them have not made that available. And certainly schools are a little bit different because often they will provide a pension, which is a completely different retirement plan structure than the 401k. But no, no one is required to offer the 401k in the Roth version. It's a newer option and it is optional, but we're seeing an increasing number of employers that are doing it. And I think that's a great thing because it's a, in my view, especially for younger workers, a much better option. Right. I agree. I'm older and I would want to just put it strictly into a Roth.

They haven't opted to do that yet. So where you can put it in a Roth or a 401 Roth. And so yeah, now you could put it in to the Roth IRA so long as you have earned income. Are you continuing to work Sheila? I am. Yeah. Okay. Yeah.

And so if you have earned income, regardless of what your employer is doing, you have the ability to put in because you're over the age of 50, $8,000 into a Roth for 2024. Okay. All right. Thank you so much.

You've answered my question. Very good. You're welcome. Thanks for calling today to Mississippi.

Hi Anne. Thanks for your patience. Go ahead.

Oh yes. In the past, the 529 plans have affected the scholarship eligibility, but now that may be changing senator is, and if that's not right, correct me. But I opened some of those years ago, but I closed them after that, after I heard that or whatever. I don't remember the details, but my question is now how much can I give my grown children per year without affecting my taxes or their taxes? And I would have to take it out of my retirement account to do it.

Yes. So beginning for the school year 2024, 2025, based on changes to the FAFSA grandparent owned 529 plans, which were previously distributions were previously treated as untaxed student income and therefore potentially reduce the student's financial aid eligibility by up to 50% of the distributed amount under these new rules that will no longer be reported as student income, thereby removing that negative impact on financial aid eligibility, which does make this once again, an attractive savings vehicle for grand children specifically, especially in the event that you think they may qualify for financial aid. And so that at least pulls that off the table, at least as far as the FAFSA is concerned in terms of the amount that you can gift per year, whether you're giving that away or putting that into a 529 plan, it's 18,000 per individual. So you could give 18,000 to each grandchild.

If you're married, you could give 36,000 total. If you go beyond that, you just have to file a gift tax form. And basically that would not trigger any tax, it would just start coming off of the annual lifetime exclusion, which is now at $13.61 million for 2024. So you would just need to file that gift tax return and track the amounts given per year that are above 18,000, which you can do without any gift tax form. But again, let me just reiterate, because you go above the 18 doesn't mean anything is taxable to you or the recipient. It just means it's starting to chip away at that lifetime federal gift tax exclusion, which you can give up to $13.61 million over your lifetime.

And it wouldn't be taxable, at least based on the current tax laws. Okay, well, I'm just wondering, even if I should do it, because my youngest grandchild is 15 and a half, and my oldest is about to be 21, and I'm going to finish with college, but I'd have to, at my age, I'm 71. And I think I have about 350,000 in my IRA. Right now I'm getting, which is too much, I know, 2,000 a month out of it, plus my Social Security. So you know, I might live 20 more years nowadays.

Yes, ma'am. Yeah, you're so you're taking more, you don't have a required minimum at this point. Obviously, they've been pushing that out. So your required minimum is not going to start until 73. But you're pulling out more than what would likely be your minimum anyway. I think the question is, are you looking to do some gifting now out of that IRA, which obviously, if you pull more out to give it away, you're going to create more tax liability, because as that money comes out, it's creating a taxable event? Or are you wanting to just gift it, you know, as a to your ears at death?

What are your thoughts at this point? I'd rather see a music while I'm still alive. But then again, I don't want to, I'm going to be self efficient. I don't want to depend on somebody else for my care, you know, for my cost of living every year.

And I probably have too high of a cost of living. I like to shop. Yes, ma'am. I understand. Did you say you have about 300,000 in that IRA? 350.

350,000. Yeah. And you're pulling a couple of thousand a month. Is that right? Yes.

Yeah. So you're Yeah, you're taking about double what I'd like to see you take. And I'd love for you to be only pulling around 14,000 a year.

But you know that that's okay. We just need to understand the implications of that, that this is, you know, when you're not going to be able to sustain, you know, an eight or 9% withdrawal rate without beginning to pull that balance down over time. How is it invested currently?

Well, I wish I had that in front of me. I'm with Wells Fargo, and I'm gonna, I keep saying I'm going to chat with a certified kingdom advisor and do something else. A lot of part of a good bit of stocks and mutual funds and that kind of thing. Well, that's probably a good thing, because that is allowing you to hopefully offset some of what you're pulling out every year for sure. You know, it sounds like I mean, I think your desire to help I get that and to be a blessing to them.

There are ways for them to pay for college, whether that's, you know, working part time or in the summer, or maybe getting a part time job, they can get loans, although we want to minimize that. There are not ways for you to fund your care for the rest of your life, in the same way that there are for these, you know, youngsters just starting out that have the ability to work and even pay back some student loans if they had to. So I would kind of err on the side of you not supporting them now, despite your desire to do so. Because I think it you know, at this point, just based on your lifestyle and the assets that you have, I'd love for you to try to hang on to everything that you have. Because if the Lord tarries and you know, he's got a plan for you to live another couple of decades, I want to make sure this money lasts. And as you said, you don't, to the extent you can want to be a burden on them, which I think means let's get the the investment allocation right. Let's bless them in other ways. You can be a great grandmother walking alongside them, encouraging them, praying for them.

But trying to do some significant giving to them right now, just giving everything else you've got and the need to let this money last as long as possible, I think is probably not the best approach. Does that make sense? Yeah, I figured that's what you say. But it makes me feel better because I want to do it. But I feel guilty if I don't do it. You don't need to feel guilty.

Yeah, you don't need to feel guilty. You pray for them, you be there for them. And let's pray that you'll have something that you can bless them with when the Lord calls you home.

But I don't think now's the time to do it. Hey, God bless you and we'll be right back. Stay with us. What's most important to you when it comes to choosing your financial advisor? Someone who's aligned with your biblical values? How about someone who will take the time to explain your options? Certified Kingdom Advisors are professionals who meet high standards in competence and integrity, and have been trained to offer biblical financial advice.

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Soundmindinvesting.org. Great to have you with us today on Faith and Finance. We're taking your calls and questions 800-525-7000. All right, back to the phones. We'll get to as many calls as we can here. Let's go to Plant City.

Cletus, thanks for your patience. Go ahead. Okay, me and my wife, I'm retired.

I'm 89 years old. And we have a little money in the bank. And we just want to know a place to what we should do to invest it in a CPA that's closest to us here in Plant City or Lakeland.

Ah, okay. Yeah. When you say you want to invest it Cletus, are you just looking to try to keep it very safe and try to get a little bit more return on it, more yield? Or are you actually wanting it to put it at risk and put it in something like stocks and bonds?

No, I just get a little more yield. It's only given us 1% now in the bank. And we got about $25,000 in there. So at least $15,000 right to start out with. Yes, sir.

And are you guys comfortable? Or could somebody, a family member, a friend help you if you're not doing business online? Would you be interested in an online bank? Well, my wife Shakespeare has no. I understand.

And I'm not making light of it. But you know, the online banks are where we will find the most yield. I mean, for instance, you can get, you know, four and a half percent right now with FDIC insurance, meaning backed by the full faith and credit of the United States government with a very highly rated online bank like Marcus, the retail bank of Goldman Sachs, you could get four and a half percent, which on 25,000, you know, would give you $1100 over the next 12 months.

But if you said I'm just not comfortable with that, you and or your wife, I certainly understand that you are the stewards and I want you all to feel very comfortable with when anything you do. The next best option, Cletus, would probably be to find a credit union in your area that you could, you know, has a brick and mortar location, but it's going to give you a little bit better rate of return than the one percent you're getting from your bank. So I think that's probably your next best option. And then beyond that, it's going to be, you know, to use an online bank to get up into the four, even five percent, which is available right now.

But it's not going to be through a brick and mortar institution or do you have any CPA, an advisor to talk to? Right. Sure. Let's do this. I'm going to put you on hold and I'm going to have my team get your information because I don't want to just give you a Web site and tell you you have to go search because I feel like you'd probably better serve with somebody to call you and your wife and they could put in your zip code and help connect you with the certified kingdom advisors there in Plant City or at least close by. So you stay on the line, Cletus, and my team will get your information and we'll get somebody from Kingdom Advisors in touch with you to make that connection. Hey, God bless you and your wife. Thank you for being on the program today. We appreciate it. Let's go to Louisiana.

Hi, Tino. Go ahead. Thank you for taking my call. Basically, I have six months of reserves and financially speaking, I'm considered to be pretty much stable. I have that reserve savings and it's quite substantial. What should I do and should I keep it on savings? Can I get a higher rate of return?

What would you advise me to do? Yeah. What are you getting in terms of a APR on that high yield savings? Very low.

Maybe less than a percent. Yeah. Okay.

Yeah, there's no reason for that. So I would definitely make a move. First of all, let me just encourage you. Great job in getting six months worth of reserves and being at a stable spot here.

That's no small feat and that'll serve you well. What I would do is open an online savings account. You can keep your existing banking relationship if you're happy with it for your checking account, what you might call your operating account. Maybe you're with a local brick and mortar bank, but I'd open an online savings and then link the two electronically and that way you can just move the money back and forth at will. I would go to bankrate.com. That's bankrate.com. Click on high yield savings and staring you in the face will be several options between four and a half and five and a quarter percent that are five star rated that all have FDIC insurance. You could read some reviews on them, you know, at nerd wallet or right there at bank rate. Pick one that you feel like has a good fit and then you'd move that money electronically once it's set up and that you can do online in a few minutes and then you'd get that 5%, you know, at least for now. And then if you need any of it within a couple of days fee free, you can move the money back to your checking account through the ACH system and probably two business days. How does that sound? Oh, that's not perfect. Bankrate.com.

Click on high yield savings. Yes, sir. Thanks for your call to Illinois. Hi, John. Go ahead, sir. Yes, sir.

I just want to find out. I'm 59 and two months old and I'm going to be turning 59 and I'm not too sure what to do with my 401k money and I have a portable pension also. I say I'm 59 and a half to put it in like a backdoor IRA or something like that. Would you go talk to a financial advisor about doing something like that? Which, you know, I want to retire at 62. Would you go talk to somebody about a program for retirement?

Yeah, yeah. I think some retirement planning is very appropriate right now. I mean, this is basically what you're talking about is a very effective strategy. The backdoor Roth, which is just the name for the strategy of converting a non deductible contribution and a traditional IRA to a Roth, if that's the case. Now, obviously, if this is already in a tax deferred environment, you don't need to use the backdoor, you do a Roth conversion. But I think having an advisor weigh your potential returns at this point, given your proximity to retirement versus the taxes that you would pay on that conversion, which would be pretty substantial.

You know, that's where I think some planning comes in. And then somebody who can just look at with a broad brush at your overall financial picture and help you determine what is your ultimate savings goal? What is your retirement budget going to look like?

How much can you expect from Social Security? And how do you position the investments whether that's your, you know, 401k or any other assets to be ready for retirement so that you've got a plan, you're not guessing, you know, you're working towards something. So I'd recommend you head to our website, faithfi.com, click on find a professional, and you could interview two or three of those certified kingdom advisors on our website, find the one that's the best fit. At this point, you're probably looking for just fee based planning, it may result in now or in the future investment management.

But I think the key right now is the planning side of it again, faithfi.com, click find a professional quickly to Indiana. Andy, I've got just a minute. Go ahead, sir.

Yeah. Hi, sir. Thanks so much for taking my call.

I got a couple quick questions. One of them is I got some money in savings. I think you answered that was one of your previous callers. Go to CDrate.com and find a better CD rate, a better interest rate. Bankrate.com. Yes, sir.

Okay. And then the other one is I owe $7,500 on my truck payment, and I got enough emergency funds. Could I just go ahead and pay that off? I like that idea so long as it doesn't deplete you below, let's say, three months worth of expenses.

But the good news is, and even if you went down to maybe two months, as long as everything looks pretty stable, the key is as soon as you pay off that truck, let's take that monthly payment and don't just absorb that and more lifestyle spending, let's make that back automatically into your savings to build it back up. But yes, sir, I like that plan. God bless you, Andy. That's going to do it for us today. I hope you found something encouraging and helpful today. A big thanks to my team. I certainly couldn't do it without them. Amy, Dan, Taylor, and Jim, may the Lord bless you, and I hope you'll come back and join us next time on Faith and Finance. We'll see you then. Faith and Finance is provided by Faith Buy and listeners like you.